We leveraged, Wall Street terminology, our investments in order to put a down payment onto our home this summer. The stipulation in leveraging our assets is that we cannot have more than 50% of the value of our assets in the loan against our investments. As I am sure we are all aware, the stock market dropped precipitously on Monday. Luckily I have a great investment rep who called me Tuesday morning informing me I was having a margin call. Which basically means I have to drop money into pay off some of the loan or they would sell off investments enough to bring the loan back within 50% or less. Somehow I suddenly found myself in a similar category with all Wall Street. Cough up money to put on our debt or start selling off.
This probably would not have normally been a problem. Except when coupled with other events, it made for a difficult situation. We lost use of all the bank cards for our regular bank in Burley, Idaho. I previously mentioned that we had fraud coming from Venezuela on that account. I did not mention we also lost use of a card for another account a week before. Add that to the situation where we have been dumping money into paying off other debt. So we were getting pretty close to not having any room to wiggle like I normally like to have. Then of all things, one of Amanda’s student loans withdrew the October monthly payment twice for some odd reason. Knowing the Department of Education is a highly sophisticated and intricate agency where money goes and is easily lost, I decided to just bite the extra withdrawal.
Tuesday rolls around and I am squeezed. My investments money market is where I usually turn for emergencies but all those savings were sucked up into saving my investments from being sold off. Those savings were not enough in the money market and I now had to move over several hundred dollars to keep my investments from being herded to auction.
No credit cards, no cash cards, and I am left with checks and the U.S. Postal Service! Wednesday sent checks from bank to bank trying to keep every account I have in black standing. At one point, I found another check bounced for a reason we have yet to determine and I ended having to borrow $2 from a buddy at school to cover the possible charge for the bounced check. Holy hannah!
Here we are arriving to Monday tomorrow. I am happy to report all bank accounts remain in black. The U.S. Postal Service worked like I needed it and money transferred easily enough. Sadly, the money I transferred on Friday was not enough to keep the margin call at bay against a sliding stock market and I contributed to a sliding Wall Street on Friday. I have decided that since they have liquidated a huge portion of my assets, we might as well pay off the entire debt against the investments and reinvest what is left over.
While I have not any real wealth since my debts are higher than my assets, I have seen what assets I do have shrink considerably this past two weeks. Think about it. I have a loan against investments sitting at 50%. If they sell off investments in order to pay the loan, they have to sell around 225% of what they are paying off in the debt. When you sell off investments, it lowers the bar for what 50% is. Therefore, to sell off enough to pay the debt down and to keep the debt below 50% of the investments value is a chore. Then we can see why banks that have leveraged their assets not only lose value, but lose tremendous amounts of money to liquidate and pay off debt. Their problem is compounded by the fact that when they start such a scenario the investors get a whiff and start selling stock and the bank loses even more assets. It is a downward spiral that ends in death for the bank. Luckily, I did not have to worry about investors lowering what I could sell my assets for (beyond what the stock market already did).
Hence, I start a new week definitely less in debt. However, at a tremendous cost of doing so. I guess the only real cost is what it costs to sell the investments, and reinvest what is left. Oh, and what the stock market did in the meantime. May I be lucky enough to buy with the price lower than what I sold it for rather than higher.
Let me assure you, we are still solvent. That is not the issue. Amanda is paid again this week and the influx will certainly breath life into the Ross banking network. We will live to see another day. The real question is, Why can’t I get in on the bail out too? After all, I have just endured what most of them are!